Credit Scoring

Before they decide on the terms of your mortgage loan (which they base on their risk), lenders must know two things about you: whether you can pay back the loan, and how committed you are to repay the loan. To understand whether you can repay, they look at your income and debt ratio. To assess your willingness to repay the mortgage loan, they consult your credit score.

Fair Isaac and Company formulated the original FICO score to help lenders assess creditworthines. You can find out more about FICO here.

Credit scores only consider the info contained in your credit profile. They never take into account your income, savings, amount of down payment, or demographic factors like gender, race, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. "Profiling" was as dirty a word when these scores were invented as it is in the present day. Credit scoring was invented as a way to consider only that which was relevant to a borrower's likelihood to pay back a loan.

Past delinquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and the number of credit inquiries are all calculated into credit scores. Your score results from positive and negative information in your credit report. Late payments count against you, but a consistent record of paying on time will improve it.

To get a credit score, you must have an active credit account with a payment history of at least six months. This history ensures that there is enough information in your credit to generate an accurate score. Some people don't have a long enough credit history to get a credit score. They should build up a credit history before they apply.

AmeriBest Mortgage can answer your questions about credit reporting. Give us a call at (321) 777-7277.

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